IIFL Home Finance: IIFL Home Finance likely to hit retail bond market in Q3 after three years

IIFL Home Finance plans to raise funds from retail investors for the first time in three years as the lender looks to broaden its liability profile, taking a cue from the Reserve Bank of India‘s move to restrict bank borrowings by non-banking finance companies.

The company has filed a draft prospectus for an enabling provision for raising up to Rs 3,000 crore. However, managing director Monu Ratra told ET it would likely hit the market in the current quarter for an initial fundraise of Rs 300-500 crore.

“We are thinking of a smaller tranche of fundraise in the third quarter just to test the water as we are coming out with a public bond after a long gap. However, we are not desperate for funds…only if we get the right pricing we would go for it,” Ratra said.

IIFL Home Finance is wholly owned by IIFL Finance, which got a regulatory breather recently after the central bank lifted curbs on its gold loan business. Following this, rating agency Crisil upgraded IIFL Finance’s outlook to stable on September 30.

The mortgage finance company, which especially focuses on the affordable housing segment, will be raising capital from retail investors for the first time since December 2021, Ratra said.

“We have to broaden the liability pie. RBI is also telling NBFCs to broad base…,” he said. The regulator raised risk weights by 25 basis points on bank lending to NBFCs in November 2023. The move was aimed at curtailing banks’ lending to NBFCs. Bank loans to housing financiers, and those eligible for classification as priority sector, was however excluded from the RBI directive. “Since then, there has been a sharp deceleration in NBFCs’ borrowing from banks, particularly by NBFCs-UL (upper layer),” RBI said in its September bulletin.

IIFL Home Finance had assets under management (AUM) of about Rs 36,000 crore as of June-end with 77% of it being housing loans. About 90% of its housing loan portfolio comprises affordable housing.

AUM grew by 22% in the last fiscal. “We are aiming for high-teen growth, nearing 20% this year,” said Ratra.